Australian property prices continue to rise, with capital city values growing for the ninth consecutive quarter, according to Domain.
Cotality (formerly CoreLogic) data also shows that national home values are now almost 40% higher than they were just five years ago.
Investors and existing homeowners may be benefiting from this capital growth, but for many first home buyers, it’s a different story.
Recent analysis from the Australia Institute shows just how challenging things have become.
In Sydney, a professional earning $90,000 would now struggle to save a 20% deposit on a median-priced house (over $1.3 million). Factoring in rent and living costs, it could take more than a decade without outside help.
Single-income buyers are particularly hard hit, and many young Australians are finding that homeownership in a capital city feels more out of reach than ever.
To make matters worse, the market is heating up again.
Despite the RBA’s rate hikes in 2022 and 2023, prices held firm due to strong demand and limited supply – a combination that typically drives values higher.
That pattern has continued into 2025, albeit at a slower pace of growth. However, with the RBA now cutting rates again, there’s renewed momentum in the market. SQM Research forecasts property values could rise another 9-11% this year as borrowing power improves and buyer activity lifts.
The Labor government made housing affordability a key policy focus of its election campaign. Its updated housing platform includes several measures designed to ease access for first home buyers:
While these initiatives could help more buyers into the market, there’s a risk they’ll also boost demand before new supply arrives – potentially pushing prices up further in the short term.
Alongside housing affordability and policy, lending rules are another critical factor impacting first home buyers’ access to the market.
The mortgage serviceability buffer – currently 3 percentage points – is the margin lenders apply to ensure borrowers could afford repayments if interest rates rise.
This buffer was lifted from 2.5 percentage points in 2021. But with rates now trending down, there’s growing pressure on regulators to reduce it again. Lowering the buffer would increase borrowing capacity and improve access, particularly for first home buyers struggling to qualify under current criteria.
Despite these challenges, first home buyers are finding ways to enter the market. Some of the alternative strategies gaining popularity include:
This approach involves renting where you want to live (often in more expensive areas) and buying an investment property in a more affordable location. It allows buyers to get a foot on the property ladder without compromising their lifestyle.
Pooling resources with trusted partners can make homeownership more attainable, though it’s vital to have the right legal agreements in place.
Financial support from parents, either as a gift, loan or guarantor, remains a key factor for many first home buyers.
Many buyers are opting to purchase with a smaller deposit and pay lender’s mortgage insurance (LMI). In some cases, this can fast-track homeownership by years.
Certain professions (such as doctors, lawyers and accountants) may qualify for LMI waivers, enabling them to borrow up to 90% or more of a property’s value without the extra cost.
Federal and state initiatives like the First Home Guarantee or shared equity schemes can help eligible buyers purchase with a deposit as low as 5%, without paying LMI.
The property market is complex, especially in the current environment of rising prices, policy shifts and rate changes. That’s why it’s important to get the right advice before making your move.
A mortgage broker can help you understand your borrowing power, explore your options and find the right loan for your circumstances – giving you a stronger chance of buying sooner.
Ready to take the next step towards homeownership? Speak to the expert team at Shore Financial. We’ll help you navigate the market, maximise your borrowing power and find the right loan to suit your goals. Call us on 1300 416 700, email us on info@shorefinancial.com.au or fill in this online form.
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